G10 FX Space Sees No Desire To Take Risk, Yuan Tumbles After PBOC Fix

The spectre of an aggressive global tightening cycle mixed with China's worrying Covid-19 situation and Russia's ongoing invasion of Ukraine unleashed risk-off flows across G10 FX space at the start to the week. Activity was limited by market closures in Australia and New Zealand, with the countries observing the ANZAC Day holiday.

• Antipodean currencies led commodity-tied FX lower, with softer crude oil prices amplifying the impact of broader risk-off flows. Oil came under pressure as Libya said it would soon resume output in several shuttered fields.
• Risk aversion threw a lifeline to the embattled yen, making it the best G10 performer, even as Reuters cited a Japanese Finance Ministry official, who denied Friday's TBS report suggesting that Japan and the U.S. discussed the possibility of a coordinated currency intervention.
• Offshore yuan went offered as the PBOC set the the mid-point of permitted USD/CNY trading range virtually in line with expectations, reverting to a neutral stance after signalling appreciation bias (~50 pip deviation) on Friday. Spot USD/CNH pierced the CNH6.55 figure on its way to fresh one-year highs, while its implied volatilities soared to fresh cycle highs across the curve.
• The EUR caught a bid in early trade, but pared gains as the session progressed. The initial impulse was generated by the news that French President Macron defeated his right-wing rival Marine Le Pen and secured re-election.
• German Ifo Survey as well as comments from BoC's Macklem & ECB's Panetta take focus from here.